Bankruptcy Exemptions

In California, when you file for bankruptcy under Chapter 7, a court appointed bankruptcy trustee will take over your assets and pay off your creditors by liquidating your assets. The trustee will however not take over all your assets. You will be allowed to keep some assets. These are known as bankruptcy exemptions. As the debtor, you can choose which of the assets you want to retain subject to certain restrictions imposed by law.

In California, the law allows the debtor to choose between two systems of exemption – System 1 and System 2. Both systems have homestead exemptions and personal property exemptions. You must choose either System 1 or System 2. You cannot choose a few exemptions from System 1 and a few exemptions from System 2.

System 1


  • You can claim exemption on any real property. Real property includes home, mobile homes, condos, planned developments, apartments, mobile homes and boats.
  • If you are single and physically fit, you can claim exemption an up to $50,000.
  •  In case of families where no other member has a home, the exemption is $75,000.
  •  For filers who are physically or mentally challenged or aged 65 or above, the exemption is $125,000.
  • If you are under 55 or older and singled within an income of less than $15,000 or married with an income less than $20,000 the exemption is 100,000.
  • If the creditor sells your home, the sale proceeds are exempt from 6 months from the date of receipt.
  • If you receive homeowner’s insurance, the proceeds are exempt for 6 months and the amount is considered part of the homestead exemption.


Personal Property


  • Food, clothing, furnishings and appliances – As needed.
  • Social Security bank deposits  – $2000
  • Building materials to improve or repair home – $2000
  • Art, heirlooms and jewelry – $5000
  • Automobile – $1900. If the automobile is lost or damaged, then auto insurance up to $1900 can be claimed as exempt.
  • Wrongful death and personal injury awards needed for support. If you are receiving the award money in installments, you can claim exemption up to 75% of the amount.
  • Unmatured life insurance policy loan value up to $8,000
  • Inmates’ trust fund up to $1000
  • 75% of your wages
  • Tools of trade – $5000. Tools of trade include motor vehicle, vessel, equipment, furnishings, books, uniforms, instruments, materials, implements and tools.
  • Public employee’s vacation credits. If the credit is in installments, at least 75% of the credit is exempt.





You can claim the entire amount of the following as exemptionHearing aids, burial plot, health or disability benefits, fraternal unemployment benefits, fidelity bonds, proceeds of life insurance policies which prohibit the use of the proceeds to pay the creditors, matured life insurance benefits required for support, professional and business licenses, property of business partnership, private retirement benefits, including Keoghs and IRAs, pensions of county employees, county firefighters and county peace officers, retirement benefits of public employees, financial aid to student, union benefits due to labor dispute, unemployment benefits, workers’ compensation. relocation benefits and aid to blind, aged, disabled, AFDC




Married couples who are filing jointly can double or increase the amount of certain exemptions if they opt for System 1 exemptions.
System 2

HomesteadYou can claim exemption up to $17,425 for real or personal property that is used as your residence. If your homestead exemption is less than $17,425 you can apply the unused portion to any property and seek an exemption on that property to the extent of the unused portion.
PersonalPropertyClothing, musical instruments, books, household goods, furnishings, appliances, crops and animals – $450 per item.Jewelry – $1150 

Motor Vehicle – $2,775


Personal injury recovers not including pecuniary loss and pain and suffering – $17,425


Unmatured life insurance contract accrued avails – $9,300


Burial plot instead of homestead exemption – $17,425


Tools of trade, books and implements – $1750


OthersYou can claim the entire amount of the following as exemptionHealth aids, wrongful death recoveries needed for support, disability benefits, life insurance proceeds required for support of family, unmatured life insurance policy other than credit, alimony, child support needed for support, ERISA-qualified benefits needed for support, crime victim’s compensation, public assistance, Social Security, unemployment compensation and Veterans’ benefits 

System 2

  • Also has a wild card exemption. You can use the wild card exemption to seek exemption of any property to the extent of $925. You can also apply the unused portion of the homestead or burial ground exemption to any other property.



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